Capitalization Matters

Higher Productivity is Back on the Front Burner at Tech Savvy Law Firms

As if a “recession” on the horizon were not enough, law firms are getting squeezed from both sides with the fall out in the real estate and private equity markets. As a result, the Wall Street Journal reported this week that law firms are laying off associates, shortening the length of their summer programs, and delaying the start date for new associates. With lower headcount and clients inspecting invoices more carefully, lawyer productivity has moved back on to the front burner for law firm management. In tough times, it makes more sense to try to make ten attorneys each just 10% more productive than hire one new attorney for $160,000 plus overhead. For instance, in a 10 hour day, is there a way to save just 1 hour of wasted time so you produce 10 hours of quality billable time instead of 9.  Imagine if you sent an email instead of making that extra phone call? What if you could find the minutes for that board meeting right on your laptop, rather than walking down the hall to the minute book room? What if you didn’t need to proof that capitalization spreadsheet one more time? Isn’t that the type of low value work that can be avoided without having any impact on your real work product?

The panelists at Two Step Software’s most recent webinar, Higher Productivity Increases the Bottom Line at Law Firms, discussed how technology can improve lawyer productivity and offer better client service. Both are critical to long term success in a difficult economy. The discussion was started with an overview thought quoting Ralph Baxter, the Chairman of Orrick, who stated: “Technology is enabling the work to be done differently, so there are fewer and fewer non-timekeepers to timekeepers.” Clearly, over the past decade, we have seen how each lawyer needs less support staff to handle phone calls or send out documents based on the most rudimentary changes such as email, web sites, and voice mail. Doug Cornelius, a senior attorney and member of the KM department at Goodwin Procter LLP, got everyone thinking about the transition that has been experienced in lawyer value from simply selling time and documents to selling legal knowledge. As top billing rates approach the magic $1,000 per hour mark, he asked whether any lawyer can still think it’s better to take an hour to create a new document if you could get it done in 15 minutes. Even with time based billing, which is certainly under attack from many general counsels, is productivity at any less of a premium. Fixed price and project based billing has certainly created a new paradigm for legal services where productivity is at a premium.

The discussion was further focused by Valerie Connell, Product Manager, Legal Content Management at LexisNexis, who raised the context of e-billing as a change that will eventually make it much easier for corporate America to compare prices and productivity across firms. She quoted a 2007 Law Firm Economic Survey which said that corporations “sure are going to think about looking for alternatives to $500 an hour proofreading of boilerplate contracts.” Her tips for tech savvy law firms were based on what she called “prudent technology investments in a recession” and based on a list from the well known legal technology expert, Dennis Kennedy. She stressed the importance of: a) technology that cuts costs; b) technology that makes you indispensable to your clients; and c) technology that helps you get new clients.

In the current difficult economic times that are facing the business of law, every lawyer needs to think about ways to work better, increase efficiency, and provide better client service. A recorded version of the webinar is available on-demand from the Two Step Software web site. For those interested in document automation, it includes an excellent demonstration by Bart Earle from Capstone Practice Systems showing how to use HotDocs to create corporate document packages on-the-fly. Imagine, a document wizard to create a complete set of organization documents in minutes for the next start-up company that walks in your office. Every penny that you save them will go right into their development work creating the next Google or Salesforce.com.

Proven Strategies for Improving Your Legal Compliance Scorecard?

At a recent Two Step webinar, Craig Newfield, Vice President and General Counsel of Gomez, Inc., and Mark Martines, Executive Vice President and General Counsel of Jenzabar, Inc., presented an excellent framework for improving and assessing legal compliance at venture-backed, high-tech companies.

At these types of companies, there is inherently a tension between activities that increase sales and profits and those that improve legal compliance since they each naturally compete for limited resources. The unstated question that tends to exist in some form is something like: “Should we take the time to improve our stock option approval process if that is going to take time away from negotiating a sales contract?” Or, “Should we formalize our development processes to insure that shareware that is used in our code is used in compliance with the specific license agreements?”

Those are the types of real questions that growing technology companies face every day as they grant new options or develop new code and where the problems faced by careless compliance will not be apparent until due diligence begins for the next round of investment or an acquisition. But, if compliance issues are uncovered, they can throw a monkey wrench into a deal just when you were hoping everything would go smoothly and not increase the level of scrutiny by the investor’s team of lawyers, accountants, and technology detectives.

The panel discussed the compliance benefits related to both enterprise risk reduction and value creation:

• Reduced risk of errors and irregularities
• Minimized risk of fraud
• Reduced risk of litigation
• Reduced costs of operational inefficiencies
• Minimized due diligence risks
• Increased regulatory compliance
• Improved contractual relationships
• Improved operational efficiencies
• Increased credibility with stakeholders
• Maximized value of the business

But, where do you start? The presentation quoted Richard Steinberg of Steinberg Governance Advisors and the former corporate governance practice leader at PwC for his recommendation to ask the right questions:

• What are the most significant risks facing the company?
• What are we doing about them?
• Are our senior management and directors apprised of all material risks?

And how to you get the right answers? The panel suggested requiring senior management and those who report to them to sign “Section 302-like” certificates that certify to legal compliance and appropriate internal controls as far as their respective business activities and information that flows up to the financial reports. Guidance can be found in Sarbanes-Oxley and the COSO framework, but it must be used appropriately since neither are a requirement for non-public companies.

The five sections that make up a typical compliance scorecard and were discussed in the webinar with real-life examples from their experience are:

• Corporate Governance
• Fraud Prevention
• Records Management
• Protection of Assets
• Compliance with Laws

While their perspective was based on their own experience at venture-backed, technology companies, certainly the compliance framework that they developed could be used by any company that is not required to comply with Sarbanes-Oxley.

Although compliance remains challenging and can be a complex balancing act, the lessons learned from companies that have been through the investment and acquisition process are that a well thought out framework and an appropriate level of effort as applied to the unique circumstances of each organization will provide an excellent ROI whether measured by risk avoidance or enterprise productivity.

The recorded version of the webinar and the related white papers are available at: http://www.twostep.com/signupforms/webinar_signup_top_challenges_compliance.asp?from=capmatters

CFOs Can Be Cool Again: Quickbooks is on Your iPhone

When I got a pop-up message from Intuit the other day that they have jumped on the bandwagon and released a read-only version of Quickbooks Online for the iPhone, it got me thinking about cell phones and my new iPhone. It made me realize how pervasive this new productivity tool had become in the nine months since its release. It’s particularly noteworthy, since Quickbooks Online does not yet work with the Apple Safari browser. Although it’s very limited and many will ask was it really worth the effort, I think it’s a great looking view-only application and delivers a minimum amount of information into the palm of your hand. How much is in a bank account? How much do we owe that vendor? How much does this customer owe us today? A balance sheet for Dec. 31st? It’s all there.

But I wondered, are they perhaps just trying to get on the “Mac is cool” bandwagon after seeing the recent onslaught of the square guy v. the cool guy in the Apple v. PC television commercials (http://www.apple.com/getamac/ads/) or have they seen the genuine utility for their user base of a “less is more” iPhone approach to online apps (http://www.apple.com/webapps/).

My own mobile, wireless experience has been that of frequently switching to the latest and greatest cell phone (sometimes I admit more than once a year) until I’ve finally settled down … with an iPhone and “it rocks.” At first, a flip phone seamed so cool compared to the original peanut shaped phones. Then, along came the Razr which was so thin, who could resist. Then, I had to debate a Blackberry versus the Treo when they were still head to head in popularity. I chose the Treo 700w, since I wanted to remain in the Windows family, but learned to regret the choice.

Then, last summer, one of my neighbors was showing me travel photos on his iPhone, “finger flipping” from one picture to another and the totally useless, but cool looking, world clock for the cities he had traveled to. The user experience was contagious, almost like bubonic plague or methamphetamines. I had to have one.  BUT, I had to worry about the ATT Wireless Edge network. Everyone claimed it would be like going back to 1998 dial-up for web surfing. Well, I decided I’d just limit my browsing to Wifi access, since by 2007 carrying around a cell phone and an iPod on a bike ride or on an airplane seemed so old fashioned. Two devices? I thought if over one million iPhones had already been sold by Sept. 2007, why not be 1,000,001. Certainly, no one could claim I was the first guy to jump off the bridge.

Six months later, there are over 5 million iPhones in use. In fact, every employee at Two Step Software has been offered an iPhone just so they can experience the direction of new technology (Apple has certainly led on innovation from the original Macintosh to today’s iPod Shuffle - now that’s small). If you’re working at a SaaS model software company on America’s Technology Highway (Route 128), spitting distance from MIT, it’s somewhat obscene to still be carrying around a cell phone, a Palm pilot, an iPod, and a beeper. Get it together!

At the rate that iPhone applications are coming out, it’s becoming the ubiquitous connectivity device for the new business executive, less focused primarily on email and more focused on browsing and other online productivity applications. I use my iPhone for phone calls, emails, text messaging, listening to music, checking the weather, reading NY Times headlines, contact management, scheduling, family photos, my alarm clock, maps and directions, YouTube, secure password management, Salesforce.com, and Quickbooks.

If you too want to be the coolest over 40, Facebook, Myspace, YouTube, Twitter, Blogspot, Gen X, SaaS, on-demand, CFO or CPA and “connect” with those young, hipster 20-something employees slugging down Jolt and cranking out Ajax code, get an iPhone, download a Wagner symphony, and surf the Wall Street Journal Online. They’ll see you rocking out and think you’re watching Sarah Silverman F------ Matt Damon on YouTube (http://www.youtube.com/watch?v=wnVJZkDuVBM).

Now, that’s cool.

From Fraud to Greed to Oops: Inadvertent Stock Option Backdating

One of our speakers at a recent webinar on Compliance, Craig Newfield, General Counsel at Gomez, Inc., aptly used the phrase “from fraud to greed” to explain the transition from the Enron period scandals that brought us the Sarbanes-Oxley Act of 2002 to the executive compensation and option backdating scandals that have brought us CEO resignations and new SEC executive compensation disclosure requirements in 2006. I’ve always thought the unique connection between these two scandals was that almost all of the intentional option backdating ended in 2002 as a result of the expedited Section 16 filing requirements of Sarbanes-Oxley. However, as a result of Sec. 409A, FAS 123R, and increased scrutiny of equity compensation reporting, we may now have entered a new period where the risks and penalties associated with “inadvertent” stock option backdating, rather than primarily intentional backdating, will become the next “gotcha” for financial executives at both public and privately-held companies with deferred compensation plans, including the most basic forms of stock option plans.

Recently, John Hancock, a corporate partner at the Boston law firm of Foley Hoag LLC, highlighted for an audience of financial executives at a Two Step Software webinar the connection between the end of the transitional rules period for Sec. 409A and on-going stock option backdating scrutiny. The overriding principle is to offer the greatest clarity as possible as to when an option grant occurred by providing written evidence that all steps were taken with respect to an option grant on a specific date.

If there is any uncertainty with respect to the number of shares, the vesting period or the list of recipients, this will increase the likelihood that the option could be considered to be granted on a later date when potentially the fair market value of the stock could be higher, resulting in an option being granted below fair market value. This could convert a qualified option to a non-qualified option, change the financial and tax implications to the employee and the company, and potentially trigger the severe penalties under Sec. 409A that apply to discounted stock options.

As far as practice tips for new stock option grants, his recommendations included:

1. Avoid actions by written consent.
2. Promptly create minutes reflecting board actions and file in minute books.
3. Avoid subsequent changes to the authorization by the Board.
4. Avoid authorizations that suggest there will be future decisions to be made.

Following the SEC Chief Accountant’s September 2006 letter that addressed option granting practices, the IRS making option backdating a Tier 1 issue in June 2007, and the new SEC executive compensation disclosure rules, it is clear that auditors will be giving greater scrutiny to equity compensation reporting and the related back up legal documentation.

With that in mind, every company, public or private, should work on standardizing their stock option granting and administration practices to reduce the risk of option backdating and improve their equity compensation reporting. In addition, companies should adopt appropriate internal controls to insure their policies and procedures are actually being followed. This type of work at the front end will pay big dividends at your next audit, your next financing transaction, or when the company goes public. 

The Trickle Down Effect of Sarbanes on Internal Controls at Venture-Backed Companies

At a recent Two Step Software webinar entitled “Lessons Learned in 2007: A Recap of Stock Option Reporting Updates,” more than half the audience of financial executives responded that they had not taken any steps to prepare for the new risk assessment auditing standards that apply to non-public companies (Statement on Auditing Standards 104-111) despite the fact that according to Dan DeVasto, the CEO of Wolf & Company, P.C., these changes to the audit standards are some of the most significant in two decades.

As explained by his partner Scott Goodwin, although non-public companies are not required to provide the same types of certifications and management reports as public companies, since they are not subject to the Sarbanes-Oxley Act, the audit standards by which the internal controls of non-public companies are going to be reviewed are now relatively similar to those of public companies (SAS 104-111 from the AICPA for non-public companies; Auditing Standard 5 from the PCAOB for public companies). In both cases, auditors will be using a COSO type framework to assess whether a company’s internal controls over financial reporting are sufficient and will need to advise the audit committee if they are not. Of course, for a non-public company there is no requirement that the executives provide a Sec. 302 certification, that management provide a Section 404(a) report, or that the auditors provide a Sec. 404(b) opinion (which is not yet required for smaller public companies).

Question: Why are public companies spending significant amounts of money addressing their internal controls to comply with Sec. 404 of SOX and satisfy AS 5 while GAAP reporting venture-backed companies are largely paying little attention to satisfying SAS 104-111, although the exercise that their auditors will be going through evaluating the sufficiency of the internal controls over financial reporting for both types of companies will largely be the same.

Answer: For a non-public company, there is no threat of public embarrassment, lower share price, and criminal penalties for the company and management if they do not satisfy the internal controls requirements. There is only the risk that an audit will take longer, become more costly, and the audit firm will be required to document and communicate any material weaknesses to management and “those charged with governance” (SAS 112).

Let’s Ask: With the impact of SOX clearly being felt by non-public companies already, whether based on pressure and covenants from investors, lenders, insurers, and other stakeholders, is it really necessary to add the threat of criminal sanctions to encourage companies that plan to be acquired by publicly-held companies in the near future to raise the level of their internal controls over financial reporting?

I hope not. Maybe by sufficient education on the benefits that companies receive by adopting good corporate governance and appropriate internal controls over financial reporting, we can avoid “SOX Lite” from becoming mandatory for companies without public investors. Hopefully, instead, sufficient oversight can be provided by audit committees and directors of venture-backed companies that hope to one day become public themselves or be acquired by publicly-held companies. Better internal controls over financial reporting are relevant to any company that is looking to increase its value in the financial marketplace. Every venture-backed company finds this out during the business due diligence process which is eventually when the “rubber meets the road.”

Your SaaS Provider's Infrastructure: Like Your Own Systems ... On Steroids

Talking with hundreds of companies over the past year about our stock plan and corporate governance applications, we've seen the "tectonic shift" that some analysts have referred to with regard to the acceptance of SaaS applications in the business application market. Even Bill Gates has referred to it as a "sea change" that has arrived and the Microsoft Chief Software Architect, Ray Ozzie, has been pushing it as inevitable. Perhaps the change in attitude started with Salesforce.com and Google Apps, with a slight nudge from Youtube, Facebook, and Craig's List, but it has clearly arrived. Having watched the change in attitudes and acceptance from real buyers between the beginning of 2007 and today, I wondered what has accounted for the shift in the acceptance of online applications by somewhat conservative business, financial and legal executives who are generally not technology "early adopters."

The primary impetus is that most internal IT executives, the ones that need to make the decision on whether to sign off on a new SaaS application, now are proponents of hosted applications and agree that in most cases SaaS applications have as good or better systems infrastructure as they could provide for their own internally installed applications. But, what is the cause of their shift in attitudes between 2006 and 2007? Infrastructure improvements.

First, the bar has been raised for the standard offerings from the top hosting providers that now offer a level of reliability, redundancy, security, and data backup that is difficult for a single company to match. Second, the bar has been raised for software application providers so that every enterprise level business application must offer an infrastructure that is properly configured, tested and hosted at a leading hosting provider. There is no longer any excuse for downtime from a SaaS provider of mission critical business applications.  Whether you are Salesforce.com, RIM Blackberry, or Two Step Software, customers expect the same standard for service level agreements and zero downtime. Not to say it can't happen despite the highest levels of technology diligence, as we have experienced from almost every one of Two Step's SaaS providers, but every step should be taken to reduce the risk.

There are five basic areas to think about when looking at a SaaS provider:

1. Security: Physical on-premise security; personnel selection; user authentication; and preventing unauthorized access
2. Redundancy: power supplies; internet access; hardware, and failover systems
3. Monitoring: 24/7 application, server, network, and user access
4. Data Back Up: Daily and intermittent on-site and off-site backups
5. Getting Your Data: Retrieval of data when service ends

For instance, at Two Step Software, we use one of the nation's leading managed hosting providers that offers a zero downtime guarantee and provides a level of physical, operational, and system security that would be difficult for any business to match. (see: http://www.twostep.com/solutions/install_options.asp) It's like your own systems, on steroids with redundant internet access, back-up power supplies, physical and online access security, redundant hardware as well as back up inventory, 24/7 monitoring, and daily data backups.

We believe that once you find an application that satisfies your business requirements, you shouldn't have to worry about the application hosting infrastructure. Let your SaaS provider focus on the details of delivering a reliable and high performance infrastructure so you can focus on your business needs. Although you can't take a walk through your SaaS vendor's hosting location, look for a SaaS provider with an excellent reputation and one that offers a technical infrastructure that you feel is superior to your own. Then, rest easy.

Timing of Expense Allocation Under FAS 123(R)

I met Terry Adamson of Radford Surveys + Consulting, a part of Aon Consulting, at the October 2007 NASPP meeting in San Francisco. He is one of the nation's leading stock option and FAS 123R valuation experts and I wanted to pass along this article that he authored that addresses a few key questions related to forfeiture rates and so-called "true-ups." Its title is: A Technical Roadmap to Expense Allocation Under FAS 123(R).

While the details of the specific approach and examples that Terry provides in this paper are extremely technical and perhaps challenging for many companies that may have smaller or newer plans, the general guidance on expense allocation is extremely useful and can be quickly understood by reading initially his short Overview and Summary.

His overview points out that in his opinion:

" ... it will become best practice to reconcile forfeiture experience quarterly based upon individual option grants, and therefore any incremental changes in estimates will consistently be re-amortized over the requisite service period during interim periods. This approach will lend to less volatile financial statements comparatively against less frequent reconciliations."

It also reiterates some background which is useful to everyone:

"FAS 123(R) allows companies to recognize compensation cost for an award with a graded vesting schedule either on a straight-line basis for each separately vesting portion ("tranche") of the award (consistent with Financial Interpretation Number 28) or on a straight-line basis for the entire award. However, the amount of compensation cost recognized at any date must at least equal the vested portion at that date."

In summary, he states:

By reconciling less frequently than every interim reporting period (whether quarterly or annually), some troubling results may occur: Shares that have already been forfeited will continue to recognize compensation expense until the point of time that reconciliation occurs. This is most troubling when reconciliation occurs at the Vesting Date, as that may not occur for several years. Expense recognition patterns will be more jagged with less frequent reconciliation and will have greater probability of material error. Therefore, companies who reconcile their awards more frequently will have expense patterns that are more predictable.

Whether a particular company chooses to reconcile quarterly or annually should be based on the unique reporting requirements of the company and particularly whether it is public or private. In either case, the article clearly stresses the importance of reconciling on a more frequent basis than solely on vesting dates, a sentiment that is shared by other leading FAS 123R valuation experts.

Link to paper: http://www.radford.com/home/ccg/valuation_services/Whitepaper_Aon_expense_allocation.pdf

IRS Waives New Filing Requirement for 2007 as January 31st Deadline Approaches for Sec. 6039 Information Statement to Employees

If your company offers incentive stock options and/or an employee stock purchase plan, you need to file the annual information statement for each employee who exercised an incentive stock option in 2007 or transferred stock acquired under an ESPP by January 31, 2008. This is not a new requirement for 2007, but many law firms put out reminders in December or January each year since the penalty for failing to provide the information statement to employees can be expensive - $50 for each filing up to $100,000.

New for 2007 was a filing requirement that required companies subject to the Section 6039 reporting requirement for employees to also file a similar return with the IRS. However, in a last minute reprieve, the IRS has temporarily waived the obligation to file the new information return with the IRS for stock transfers covered under Section 6039 for 2007. The annual obligation to provide an information statement to employees remains in effect.

Pillsbury Winthrop Shaw Pittman sent out an Alert dated January 3, 2008 to its clients which summarizes the requirement to provide stock transfer information to employees as follows and also lists the specific information to be provided:

Section 6039 of the Internal Revenue Code requires that corporations provide a written statement to each current and former employee who receives stock pursuant to the exercise of an incentive stock option or who transfers for the first time stock received under an employee stock purchase plan (ESPP). The statement must be provided by January 31 of the year following the calendar year in which the stock transfer was made.

The IRS provided the following in IRS Notice 2008-8 waiving the new filing requirement with the IRS for 2007:

The Treasury Department and the IRS intend to issue regulations that prescribe rules relating to the information return requirements contained in § 6039, as amended by the Act. The Treasury Department and the IRS expect that the forthcoming regulations generally will retain the existing rules contained in § 1.6039-1, relating to the information statements to be provided to employees, and generally require that the same information be included in the information returns made with the IRS. The Treasury Department and the IRS also expect that the new § 6039 regulations will be effective retroactively to January 1, 2007.

Because regulations under § 6039 have not yet been issued, the IRS is waiving the obligation to make an information return for 2007 stock transfers governed by § 6039. However, corporations should continue to furnish to employees the information required by, and in accordance with, existing § 1.6039-1, with respect to such stock transfers.

Stay tuned for more information related to the new IRS filing requirement later this year. In case you were not aware of it already, add the new filing to your ticklers for January 2008 and stay tuned for updated information from the IRS.

Year End Reprieve: SEC Extends Safe Harbor for Estimating Expected Term

Are you concerned about estimating your stock option expense because you are a company that has little or no historical exercise data and you thought you’d be losing the simplified method under SAB 107?

If so, you’ve been granted a reprieve by the SEC.

The safe harbor of SAB 107 (released in March 2005) for estimating the expected term for employee stock options has been extended beyond Dec. 31, 2007 by SAB 110, released by the SEC on Dec. 21, 2007.

While most companies are saying thank you, the rest are saying “it’s about time.”  One of the single most asked questions related to using the Black-Scholes formula had been “what were companies with no data to estimate the expected term supposed to do when SAB 107 expired?”  With 10 days to go, the SEC finally responded.

A nice summary is available in the SEC press release at: http://www.sec.gov/news/press/2007/2007-267.htm

As a result of SAB 110, eligible companies, both public and privately-held, are able to continue to use the simplified method under SAB 107 for estimating expected term if their own historical experience isn't sufficient to provide a reasonable basis for such an estimate.

As stated in Release 2007-267:

Specifically, SAB 107 provided a simple rule for estimating the expected term of what it called a "plain vanilla" option: it would be just the average of the time to vesting and the full term of the option. Companies could use this simplified method until Dec. 31, 2007. The new assistance that is being issued today, SAB 110, extends the opportunity to use the simplified method beyond Dec. 31, 2007.

The Interpretive Response section of SAB 110 states:

… the staff understands that an entity that is unable to rely on its historical exercise data may find that certain alternative information, such as exercise data relating to employees of other companies, is not easily obtainable. As such, some companies may encounter difficulties in making a refined estimate of expected term. Accordingly, if a company concludes that its historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term, the staff will accept the following "simplified" method for "plain vanilla" options consistent with those in the fact set above: expected term = ((vesting term + original contractual term) / 2) …” Note: the Staff uses a weighted-average formula for “vesting term.”

At the same time, the SEC has modified its previous position and now only permits the use of the SAB 107 method if the “company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.” In the past, a company could have used the simplified method even if it had a greater amount of historical exercise data.

The SEC explained that at the time that SAB 107 was released, it had expected that historical information about employee exercise behavior from other companies, such as actuarial studies, would soon be readily available. This was the basis for the statement in SAB No. 107 that the staff would not expect a company to use the simplified method after Dec. 31, 2007. Since such information is not yet available, the Staff removed the deadline.  It is likely that once such data is available, the SEC may again prohibit the use of the SAB 107 simplified method.

SAB 110 is available on the SEC Web site at: http://www.sec.gov/interps/account/sab110.htm

A Blog for CEOs at Venture Funded Start-ups

I recently came across a great blog for start-ups and venture capital companies, called Altgate. It’s written by Furqan Nazeeri, who is an Entrepreneur-in-Residence with Softbank Capital of Newton, MA. He talks about “Startups, Venture Capital & Everything In Between.” His short articles are practical, useful and easy to read. I’m a big fan, not because he recommends our software, but because if you’re someone like me, a CEO or CFO or an entrepreneurial, high-tech company with very little time, you will find it useful.

Furqan helps Softbank evaluate and source investment opportunities, works with Softbank portfolio companies, has been a key person in a number of startups, and is continually searching for the next opportunity. In the process of researching equity compensation for startups, he came across Two Step’s Equity Focus stock option management software.

He was so intrigued by the product claims of being an easier way to manage options and create capitalization tables that he called Two Step and asked for a demonstration. His opinion: “I was very impressed. … In the past I have used shrink wrapped, desktop software to manage options, as well as just Excel files and shared directories. I think Equity Focus is superior to both.”

Here’s his unsolicited review which you can read on his blog.

The solution is delivered as a service like Salesforce.com and provides an easy to use yet very sophisticated tool to create and manage your company's capitalization table. It allows you to create a comprehensive archive of all the events and related documents that influence your cap table and it provides an audit trail.  The reporting looks very powerful and the pre-built work flow and forms are comprehensive and flexible enough for most startups. And to boot, it is priced very reasonable - cheap enough, in fact, that every startup should use this tool or one like it from inception.

My unsolicited review of Altgate: Don’t just read his blog. Trust him one step further. Read the blogs he reads. I do.